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Jay L. Taylor, Major, A.U.S.
Liaison Officer, Fiscal Division
Federal Reserve Bank Building
Los Angeles, California

November 27, 1942

Mr. Marriner S. Eccles, Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C.
Dear Marriner:
Regulation V loans are working so smoothly in this area and have met
with such widespread approval among the business men and bankers, that
it occurred to me some time ago that foreign financing after the war
might be carried on by somewhat the same principles as those under
which Regulation Y operates.
Instead of the Government putting huge sums of money into various foreign countries to finance those governments* operations, why wouldn't
it be better for banks and investment companies to lend money directly
to the various businesses operating in ..foreign countries and let our
Government guarantee a percentage of the loan exactly PS they do in the
present 7 loans!Wouldn't this be a much better plan than to have the
two governments""handle all the money? You v/ould have the benefit of
the management of the bankers and investment bankers, and have the
Federal Reserve System supervising the entire operation for the United
This would, of course, place in every foreign country in which loans
were made, representatives of the different investment houses who would
have a vital interest in the country in which they were operating.
They would make friends not only with the borrower but with a great
many other people in the country and they, in turn, would be able to
bring back to the United States first hand information concerning that
country's financial and political problems. These .Americans would live
in all of these foreign countries, raise their children there and in a
few year's time we would have many Americans thoroughly trained in foreign affairs.
I know how greatly interested you are in affairs of this kind and, perhaps it is too early for me, or any other army officer, to be thinking
about the end of the war, but I wanted to pitch this into the pot for
what it is worth* Hope you find time to tell me what you think of the


Jay L. Taylor, Major, A.U.S.
Liaison Officer, Fiscal Division

December 4, 1942.
Major Jay L. Taylor, A.O.S.,
Liaison Officer, Fiscal Division,
Federal Reserve Basic Building,
lorn Angeles, California.
Sear Jayi
X have yoora of Kovember 27 in which you suggest
that Regulation ? loans or sons similar mechanism might
be used in the post-war period to stimulate lending by
investment bankers and others In reviving oar foreign trade,
lour suggestion Is interesting and, from the
point of view of mechanics, it would seem to be entirely
feasible* Theirs is, however, a policy question which seems
quite formidable to me.
Under Regulation T it is universally assumed in
all eases that the Government is benefited by the production
for which the loan is made. This assumption does not hold
good in peace-time, since there are many enterprises in
both domestic sad foreign business from which the Govern*
ment doss not benefit. In fact, there ions many ventures
which the Goveraawrat might well wish to discourage. If
this problem were met by requiring that soae representative
of the Goveraaent certify that the business to be financed
would be in the public interest* I think you will agree
that it would require a staff of technicians In almost
•very field and consequently the organization would be very
top-heavy and expensive.
I don't wish to discourage your ambition to figure
out ways and means of stimulating business in the post-war
period* I aa glad that you have the imagination to look
ahead sad to make suggestions.

H t h best wishes, I am